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India should begin fiscal consolidation with next budget: IMF news
05 February 2010

According to the International Monetary Fund, India needs to begin fiscal consolidation with the next budget as its deficit has entered double digits thanks to the stimulus measures aimed at reviving the economy.

"Although we believe that the stimulus measures that were put in place were instrumental in supporting activity during the crisis, it has pushed the deficit into double digits again, and the debt back to nearly 80 per cent," IMF deputy director, Asia and Pacific Department, Kalpana Kochhar said in a conference call.

Kochar said the IMF would recommend that the fiscal adjustment strategy begin with the next budget, which the finance minister, Pranab Mukherjee had already announced would happen. She added that the IMF believed that the strategy should be anchored on a debt target along with some nominal expenditure rules.

India had last year introduced tax cuts and increased expenditure to prop up the economy hit by the global economic slowdown, while the Reserve Bank had also cut its key policy rates to infuse additional funds into the system.

In its budget for 2009-10, the government had proposed to raise Rs4.5 lakh crore from the market, up from Rs3.1 lakh crore for the previous year and pegged the fiscal deficit at 6.8 per cent of the GDP as against 6.2 per cent in 2008-09.

Kochhar said India was among the first countries to recover from the crisis.

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India should begin fiscal consolidation with next budget: IMF